U.S. Signals Support for Japan’s Yen Policy

By ANDREW E. KRAMER

February 15, 2013

MOSCOW — Ben S. Bernanke, the Federal Reserve chairman, strongly indicated on Friday that the United States did not intend to censure Japan for weakening its currency over the last several months, something that has aided Japanese exporters and angered its competitors.

Mr. Bernanke spoke in brief introductory remarks at a conference in Moscow of the Group of 20, a club of the world’s largest industrial and emerging economies.

At issue are stimulus programs backed by Prime Minister Shinzo Abe, who is also maintaining pressure on the Bank of Japan to keep interest rates near zero and flood the economy with money to support Japanese manufacturers. As a result, the yen has lost about 15 percent of its value against the dollar over the last three months, meaning products made in Japan, like some Sony electronics or models of Toyota cars, are relatively cheaper.

Japan’s maneuver touched off fears that other countries and the European Union might follow suit in a so-called currency war, which has been the main topic of the Group of 20 meeting here, which runs through Saturday.

Initially, it seemed the world’s largest economies might agree on a firm statement at the end of the meeting to condemn a currency war, or competitive devaluations. This tactic is now widely seen as a beggar-thy-neighbor approach to creating growth that would ultimately harm a global recovery and is understood to be a cause of the lingering nature of the depression in the 1930s.

Mr. Bernanke, an advocate of the loose monetary policy in the United States known as quantitative easing, but also a student of the Great Depression, suggested a distinction should be drawn based on the intention of the monetary easing.

“The United States is using domestic policies to advance domestic agendas,” Mr. Bernanke said, speaking in a gilded and colonnaded chamber in the Kremlin to a round table of the world’s leading central bankers and finance ministers, in addition to President Vladimir V. Putin of Russia.

Christine Lagarde, chief of the International Monetary Fund, said Japan’s efforts to defeat deflation was “sound policy.”

Alexander Zemlianichenko / Associated Press

“We believe that by strengthening the U.S. economy, we are helping to strengthen the global economy as well,” Mr. Bernanke said. “We welcome similar approaches by other countries.” He said he endorsed an earlier statement at the meeting from Christine Lagarde, the director of the International Monetary Fund, who had said the risk of a currency war was “overblown.”

The global recovery has become unbalanced, Ms. Lagarde said in her statement to the group. Developed countries are swooning, while the emerging markets bounced back quickly, and yet such countries, including Russia, have been critical of the stimulus efforts of the developed nations. Japan’s devaluation of the yen is “sound policy,” she said.

“The international monetary system can function effectively if each country follows the right policies for their domestic economies,” she said, ultimately lifting the tide of the global marketplace.

Ms. Lagarde did caution that too bald a ploy to prop up exports would not count as a justified weakening of a currency.

Because loose monetary policy encourages economic growth while also helping exports, critics of such tactics say these are distinctions without a difference.

Germany’s finance minister offered a contrarian view, saying that countries should not use easy money to avoid reducing their deficits over the long term, with measures like reducing government waste.

The Russian finance minister, Anton Siluanov, the host of the meeting, has also been pushing for a strong statement against competitive devaluations in the final communiqué from the forum, expected Saturday. Mr. Siluanov said in his opening remarks that a statement endorsing market mechanisms to set exchange rates would “find a place in the communiqué.”

That reiterated the position of a statement issued by the Group of 7 earlier this week. But it now seems a watered-down version is more likely.